Kibo Mining (AIM:KIBO) has not yet received any proceeds from its recent £750,000 placing arranged by recently insolvent broker Beaufort Securities. This is the second time its has fallen prey to an insolvent broker, though if history is anything to go by the situation should hopefully prove to be no more than a bump in the road.
In a statement released today, Kibo noted Beaufort’s insolvency, which was declared this morning by the FCA, and said its application to trading for 17.6m new shares has been put on hold until further notice. The company added that it is currently ‘urgently seeking’ further clarification around the placing, with a particular focus on receiving a timeline for the expected release of the outstanding placement proceeds. It said it will provide an update on this situation as soon as more information is available and the likelihood is Kibo will still receive its funds.
The FCA has imposed requirements on Beaufort and its sister firm Beaufort Asset Clearing Services that force them to cease all regulatory activity and bans them from disposing of any business or client assets without the FCA’s consent. The regulator said it was necessary for insolvency practitioners to take over the running of the two companies, in order to protect assets from dissipation and to protect customers of both firms.
With Beaufort no longer able to provide broking services, Kibo added that it is now seeking to appoint a replacement as soon as possible and will update the market when this appointment has been made.
Kibo’s shares were down 3.8pc, or 0.2p, to 5.8p at the time of writing. It had raised the £750,000 to support the creation of a strategic regional electricity supplier.
Unfortunately for Kibo, this is not the first time one of its placings has been complicated by a broker going into administration.
In March 2015, the Tanzania-focused mineral exploration and development company carried out a £950,000 placing through Hume Capital, which went into insolvency just days later.
Hume appointed administrators after concluding that its legacy losses and costs of business were too high compared to the revenues it was generating to continue operations. Kibo managed to receive an initial £219,000 worth of the proceeds straight away, but the remainder of the cash reminded in the hands of Hume’s administrators. It took Hume’s administrators a further nine months to repay Kibo fully – minus a small proportion representing administration costs. Kibo ended up appointing Beaufort as its broker to replace Hume.
Beaufort’s insolvency is likely to continue to have serious repercussions for AIM, with many investors using accounts with Beaufort to hold and manage their investments. Now that it is known that the US Department of Justice is pursuing Beaufort on charges of money laundering and securities fraud those repercussions could be a lot more extensive.
However the good news for Beaufort’s corporate clients, like Kibo, is that the broker’s troubles should hopefully not lead to any material losses. There is no suggestion that there have been any issues with segregation of client funds, so although Kibo might have to wait for its money it should recover the overwhelming majority of it.